Cabinet approves agreement to keep Saudi $3b in SBP

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The federal cabinet has approved an agreement to keep $3 billion aid from Saudi Arabia in the State Bank of Pakistan. The Cabinet endorsed the deal via a circulation summary Saturday.

The Saudi government had promised to maintain a reserve of $3bn at the State Bank. According to the agreement, the aid will remain in the State Bank’s deposit account for a year.

“The SBP has finalised all arrangements and now everything is in place and the amount of the agreed deposit will be received within the next couple of days,” top official sources confirmed.

Pakistan would, however, pay the Saudi government a 4% yearly profit on this sum, sources confirmed.

The proposed agreement with the Saudi government was forwarded to the Ministry of Law and the Office of

the Attorney General. The Attorney General’s Office and the Ministry of Law reached an agreement on a draft.

Following the legal opinion, a copy of the agreement was submitted for approval to the federal cabinet. The cabinet approved the State Bank’s retention of $3 billion from the Saudi Development Fund.

Pakistan’s entire liquid foreign reserves, according to the central bank, stood at $22.773 billion on November 19, 2021.

The numbers indicate that the SBP held $16.254 billion in foreign reserves, while commercial banks kept $6.519 billion in net foreign reserves.

The SBP’s reserves declined by $691 million to $16.254 billion during the week ended November 19, 2021, primarily owing to external debt repayments.

According to official sources, Saudi Arabia has agreed to provide $1.2 billion for the supply of refined POL products, with the Economic Affairs Division negotiating on behalf of the Pakistani government.

In response to questions, Muzammil Aslam, Spokesperson for Adviser to the Prime Minister on Finance, said Pakistan was expecting to get $7 billion from just three sources over the next 60 days.

These include $3 billion in deposits from Saudi Arabia, a $1.2 billion Saudi Oil Facility with deferred payments, an $800 million Islamic Development Bank oil facility, $1 billion raised through the issuance of Sukuk bonds, and $1 billion from the IMF.

All of these dollar inflows, he argued, would be sufficient to alleviate pressure on existing import bills.

A summary drafted by the Finance Division noted that after the draft of the deposit agreement between the two countries was vetted and cleared by the Ministry of Law as well as the Office of the Attorney General for Pakistan, it was sent to the prime minister.

 

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